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Collins Foods Ltd reports 30% jump in half-year sales but posts loss of $22 million

In its half-year to 12 October 2014, fast food owner and operator Collins Foods Ltd (ASX: CKF) saw revenues rise 29.6% year-on-year, to $256.7 million.

Unfortunately the company couldn’t push much of that gain down to profit because of impairment charges totalling $36.5 million, largely relating to the company’s struggling Sizzler business. This resulted in a loss of $22.9 million for the period.

However there were some positives to take out of today’s announcement, including:

  1. KFC Queensland same store sales (SSS) were up 3%
  2. The recently acquired KFC Western Australia/Northern Territory saw sales climb 4.3%
  3. Three new KFC stores were opened and 13 remodelled
  4. An interim dividend of five cents per share was declared, up 11%

Commenting on the results CEO Graham Maxwell said: “We are particularly pleased with the performance of our KFC businesses in both Queensland and Western Australia/Northern Territory.”

He also noted the group’s plan to reinvigorate the Sizzler chain (by rebranding it as Get Refreshed) has shown some “encouraging signs”. Three stores including Cleveland, Caboolture and Mermaid Beach have already been remodelled. “While it is still early days, the results thus far are encouraging with evidence of a solid lift in sales at Cleveland and Caboolture,” Mr Maxwell said in an announcement to the ASX.

Looking Ahead

Although disappointing, the write-down of the Sizzler chain will not impact on the company’s Asian venture nor adversely affect its funding covenants or payment of dividends. Indeed for the remainder of FY15, the group expects to continue expanding its KFC store count and improving its recently acquired businesses, as well as investing in Snag Stand and Sizzler Asia.

At midday today, shares in Collins Foods were trading slightly up 1.7%, whilst fellow fast food owner Retail Food Group Limited (ASX: RFG) was trading slightly lower.

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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the companies mentioned.    

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